CQC hands Four Seasons debt crisis deadline

Health watchdogs have handed Britain’s biggest care-home operator a 48-hour deadline to resolve a £26m interest payment that has become a focal point for doubts about the company’s future.

Sky News has learnt that the Care Quality Commission (CQC) has told Four Seasons Healthcare Group and its biggest creditor, the investment firm H/2 Capital Partners, to come to an agreement over the debt repayment by Monday evening.

The regulator, which can recommend to local authorities that they cease placing residents in homes, has told H/2 that it wants a formal guarantee that it will stand behind the company if a so-called standstill deal has not been reached by then.
That assurance is already understood to have been provided by H/2, which has lined up the cross-bench peer Baroness Ford – who previously chaired Barchester, another care-homes group – as Four Seasons’ chairman.
Sources said this weekend that negotiations between Four Seasons, which operates nearly 350 homes, and H/2 were progressing well and that an announcement in relation to the £26m interest payment was likely to be made on Monday.
The care-home operator is responsible for 17,000 predominantly elderly residents and employs just over 25,000 people – meaning it occupies an important role in Britain’s adult social-care provision.
Like other operators in the sector, Four Seasons has seen its financial performance suffer amid cuts in local authority funding and rising costs such as the national living wage.
Terra Firma Capital Partners, the buyout firm which bought Four Seasons for £825m in 2012, has been trying to hand the keys to the company to H/2 but is unwilling to relinquish its claim over 24 homes which are held within an entity called Brighterkind.
H/2 has already offered to let Four Seasons miss the next debt repayment, which is due on Thursday, but relations between them have become severely strained in recent weeks.
Sources said this weekend that negotiations were now being held largely between the CQC, which is being advised by the law firm DLA Piper, Four Seasons and H/2.
It was unclear whether Terra Firma’s consent was required to activate the standstill agreement.
The prospect of the UK’s biggest care-homes group falling into administration just weeks before Christmas had begun to emerge amid the stalled talks between Terra Firma and H/2.
Sky News understands that EY, the accountancy firm, has been put on standby to handle an administration if the crisis at Four Seasons deteriorates further.

Were that to happen, it would be the industry’s biggest financial failure since the collapse of Southern Cross in 2011.
However, a formal forbearance deal will reduce the risk of such an event, since it will give H/2 time to pursue a so-called consent solicitation exercise, canvassing support from Four Seasons’ other bondholders.
A 30-day cure period will also prevent any other creditors pushing the company into administration.
Terra Firma, which has lost an estimated £450m on its investment in Four Seasons, and H/2 are still understood to be at loggerheads over the appointment of a restructuring committee and independent directors to the board of the company.
The CQC has been monitoring the crisis at Four Seasons for months, and is understood to have decided to give the company and its biggest creditor a deadline several days ahead of the debt repayment date
Andrea Sutcliffe, the regulator’s chief inspector of adult social care, said: “Through our Market Oversight function, CQC has a responsibility to advise local authorities if we believe that services are likely to be disrupted as a result of business failure.
“We continue to closely monitor developments of what is a dynamic situation.
“I would like to confirm at this point in time we do not believe that services are likely to be disrupted as a result of business failure.”
A spokesman for Four Seasons said on Saturday that it was “making constructive progress towards restructuring the business under new ownership”.

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A senior source close to H/2 Capital said it was “doing everything it can to deliver a positive outcome to discussions that will ensure that the welfare of the 17,000 residents will not be jeopardised in any way”.
Terra Firma said it had “urged all parties to agree a consensual restructuring of Four Seasons”.